Correlation Between Sack Lunch and Next Generation

Can any of the company-specific risk be diversified away by investing in both Sack Lunch and Next Generation at the same time? Although using a correlation coefficient on its own may not help to predict future stock returns, this module helps to understand the diversifiable risk of combining Sack Lunch and Next Generation into the same portfolio, which is an essential part of the fundamental portfolio management process.

By analyzing existing cross correlation between Sack Lunch Productions and Next Generation Management, you can compare the effects of market volatilities on Sack Lunch and Next Generation and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Sack Lunch with a short position of Next Generation. Check out your portfolio center. Please also check ongoing floating volatility patterns of Sack Lunch and Next Generation.

Diversification Opportunities for Sack Lunch and Next Generation

0.33

Correlation Coefficient

Sack Lunch  Next Generation

Weak diversification

The 3 months correlation between Sack and Next is 0.33. Overlapping area represents the amount of risk that can be diversified away by holding Sack Lunch Productions and Next Generation Management in the same portfolio, assuming nothing else is changed. The correlation between historical prices or returns on Next Generation Mana and Sack Lunch is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Sack Lunch Productions are associated (or correlated) with Next Generation. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Next Generation Mana has no effect on the direction of Sack Lunch i.e., Sack Lunch and Next Generation go up and down completely randomly.

Pair Corralation between Sack Lunch and Next Generation

Given the investment horizon of 90 days Sack Lunch Productions is expected to under-perform the Next Generation. In addition to that, Sack Lunch is 1.63 times more volatile than Next Generation Management. It trades about -0.05 of its total potential returns per unit of risk. Next Generation Management is currently generating about 0.02 per unit of volatility. If you would invest  0.22  in Next Generation Management on December 4, 2024 and sell it today you would lose (0.02) from holding Next Generation Management or give up 9.09% of portfolio value over 90 days.

Time Period	3 Months [change]
Direction	Moves Together
Strength	Very Weak
Accuracy	100.0%
Values	Daily Returns

Sack Lunch Productions  vs.  Next Generation Management

Sack Lunch Productions

Risk-Adjusted Performance

Good

Compared to the overall equity markets, risk-adjusted returns on investments in Sack Lunch Productions are ranked lower than 11 (%) of all global equities and portfolios over the last 90 days. Despite quite uncertain forward-looking signals, Sack Lunch disclosed solid returns over the last few months and may actually be approaching a breakup point.

Next Generation Mana

Risk-Adjusted Performance

Modest

Compared to the overall equity markets, risk-adjusted returns on investments in Next Generation Management are ranked lower than 5 (%) of all global equities and portfolios over the last 90 days. In spite of rather weak primary indicators, Next Generation exhibited solid returns over the last few months and may actually be approaching a breakup point.

Pair Trading with Sack Lunch and Next Generation

The main advantage of trading using opposite Sack Lunch and Next Generation positions is that it hedges away some unsystematic risk. Because of two separate transactions, even if Sack Lunch position performs unexpectedly, Next Generation can make up some of the losses. Pair trading also minimizes risk from directional movements in the market. For example, if an entire industry or sector drops because of unexpected headlines, the short position in Next Generation will offset losses from the drop in Next Generation's long position.

The idea behind Sack Lunch Productions and Next Generation Management pairs trading is to make the combined position market-neutral, meaning the overall market's direction will not affect its win or loss (or potential downside or upside). This can be achieved by designing a pairs trade with two highly correlated stocks or equities that operate in a similar space or sector, making it possible to obtain profits through simple and relatively low-risk investment.

Check out your portfolio center.

Note that this page's information should be used as a complementary analysis to find the right mix of equity instruments to add to your existing portfolios or create a brand new portfolio. You can also try the Portfolio Anywhere module to track or share privately all of your investments from the convenience of any device.